Meeting China's meat demand

ALTHOUGH China's population growth has slowed to a rate of 0.3% annually, the urbanization rate has surpassed 50% and is expected to exceed 63% by 2023, according to a new U.S. Department of Agriculture report.

In addition, USDA projected a continuation of China's robust economic growth for the next decade. Furthermore, China is focusing on a new era of economic development by encouraging more urbanization and improving living standards for the entire population.

As more individuals live in urban areas in China, a shift in food preferences will also occur, especially as individuals gain more disposable income and access to a variety of foods through nearby supermarkets, restaurants and cafeterias.

This will result in dietary changes and create new opportunities for new foods in the Chinese market, according to report authors James Hansen and Fred Gale with USDA's Economic Research Service.

USDA is predicting a rise in China's meat consumption over the next 10 years, which is supported by the current economic conditions in the country (Figure).

While pork remains the main protein choice among Chinese consumers, poultry is gaining in popularity because it is a cheaper, viable substitute for pork.

Still, beef and mutton will both play a pivotal role in ethnic cuisine, especially as people have more food dollars to spend.

USDA estimated per capita consumption of pork to increase at least three times more than the rise in poultry and seven times more than increase in beef consumption.

Despite this, poultry is expected to gain a larger share of China's total per capita consumption in the next decade: Poultry is projected to rise 2.4% per year, compared to 1.5% per year for pork consumption over the next 10 years.

The forecast for increased meat consumption in China opens a window of opportunity for U.S. meat and poultry. However, China's current economic strategy includes discouraging "backyard" animal agriculture operations. Therefore, growth in U.S. meat and poultry exports to China will be constrained by an increase in China's domestic meat and poultry production.

From 1986 to 2012, China's output of poultry, pork and beef rose from 20 million to 70 million metric tons. USDA predicts that the country will increase pork, poultry and beef production by 30%, or an output of 90 mmt, due to the shift to more concentrated livestock operations and an increase in commercial feed usage.

Even though the government's current effort is to support growth in meat production, China's livestock sector will face rising costs, diseases, environmental regulations and resource constraints, Hansen and Gale said.

Larger-scale farms, in particular, will encounter obstacles such as obtaining large tracts of land or operating within the parameters of land use regulations.

The rise in commercial feed use will cause an upsurge in China's soybean and corn imports since limits on the country's available arable land will make it impossible to sustain the production increases needed for grain.

By 2023-24, USDA anticipates that China's soybean imports will comprise more than 70% of total global soybean imports; furthermore, most of the country's soybean meal supply will be generated from those imports.

Similarly, a vast rise in China's need for corn, accounting for 40% of global corn trade over the next decade, will make it the leading importer by 2023-24, USDA projected. While the U.S. will most likely be the main supplier, it will have competition from the Ukraine, Argentina and Brazil.

Nevertheless, policy adjustments in China can alter any prediction for the country's demand for imports. For example, early this year, China announced that price supports for soybeans and cotton would be eliminated, which resulted in farmers abandoning these crops.

In addition, the government supported prices for corn, and now a record harvest has caused a large stockpile of corn at a time when demand for the commodity is declining.